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Index IDEA: US dollar strength dilutes international index returns

September 13, 2018

Broad-based dollar strength has weighed on US investor returns in international equities YTD. When US investors buy foreign stocks based in their local currencies, their returns suffer when these currencies fall against the dollar. As such, the US greenback’s strength in 2018 relative to both developed and emerging market currencies has acted as a major headwind for US investors investing in these markets.

“Several persistent macroeconomic trends have boosted the US dollar. These include faster economic growth relative to other developed and emerging markets, higher interest rates, and more aggressive central bank monetary policy tightening. None of these macro trends show signs of changing in the near term.”

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